Question: When can we see the tangible cost saving / benefits of the merger or acquisition?
Answer: All businesses can relate to the “Total Costs per Transaction”, whether your organization is manufacturing or service based. The Total Costs per Transaction is a summation of the total fixed costs, variable costs, and merger / acquisition costs.
Assume that for the consolidated / combined new company, the Total Costs per Transactions is at Point “A” on the date of the merger / acquisition.
Immediately after the merger / acquisition, the Total Costs per Transaction will increase. This is inevitable. A company will go from Point “A” to Point “B” and stay at Point “B” for a period of time. Why?
- Professional Fees
- Severance Costs
- Redundant Systems
- Corporate Cultural Issues - never underestimate.
- Possible Excess Facilities / Capacity
- Two Executive Teams
- Human Factor – concern / direction
The challenge is how to get to Point “C” as quickly as possible. Point “C” being the generation of the tangible savings and / or the decrease in the Total Costs per Transaction.
The time of achieving Point “A “ to Point “C” is what separates the winners from the losers with regards to mergers and acquisitions. Each and every transaction will cost the new company more expenditures until the company reaches Point “C”. This is why time is of the essence in post integration work.